cost-volume-profit analysis

Westfield Corporation makes two different boat anchors?a traditional fishing anchor and a high-end yacht anchor?using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity and has been doing so for nearly two years. Ralph Sampson, the company's CEO, want to cut back on production of the fishing anchor so that the company can make more yacht anchors. He says that this is a "no-brainer" because the contribution margin of the yacht anchor is so much higher.

Instructions
Write a short memo to Ralph Sampson describing the analysis that the company should do before it makes this decision and any other considerations that would affect the decision.

Solution Summary

Purchase Solution

Related Solutions

I need with this questions.
For what is cost-volume-profit (CVP) analysis used? What are some of the key underlying assumptions that make CVP analysis useful for decision makers? Why might decision makers use CVP analysis?
I need a word count of 200
Thank you,

When conducting a CVP analysis how it can be helpful in organizational development? How does this tool help you determine pricing and R&D budgets? Consider the concepts of Market Saturation, price elasticity and price-demand relationships.

What is the breakeven point from the given below information?
fixed costs $20,000
variable costs 33% of sales
avg selling price is $10,000
a) As % of sales, what is its variable or contribution margin?
b) If the average sale is $10,000 what is the contribution margin/vehicle?
c

Under the assumptions used in cost-volume-profitanalysis, as volume increases:
A. fixed costs increase in proportion to the increase in volume.
B. variable costs per unit remain the same.
C. fixed costs per unit remain the same.
D. variable costs per unit increase in proportion to the increase in